David Jones A$400m spend will bring transform retailer, add touch of theatre after years of neglect says new CEO

Australia’s David Jones sees major challenges ahead. It won’t go downmarket under its new owners. It will reconnect with its customers. It will bring a touch of theatre to its business. Oh, and the whole organisation will be transformed in the next few years. Those were the messages from David Jones’s still-new CEO Iain Nairn on Monday as the department store group announced an investment programme of over A$400m.

South Africa’s Woolworths Holdings is to invest heavily in its recently-acquired department store group, rolling out 10 new stores, refurbishing existing units, and upgrading an operating system the CEO described as “awful”.

But awful wasn’t the only word he used to describe the chain he now heads with the executive “shocked” by some of what he found, including “archaic” systems and loyalty programmes that reach very few customers.

And it can’t be denied that something had to be done with David Jones having emerged from several years where it was battered by management issues, falling sales, a confident arch-rival in Myer and the onslaught of international retailers both physically and online.

The major investment to be made over five years will challenge Myer and counter the threat of those overseas fashion brands and e-commerce continuing to make major inroads into its domestic market.

“Historically David Jones was the iconic brand in the southern hemisphere but it kind of lost its way over the last few years,” Iain Nairn – who previously ran Country Road and Witchery for Woolworths – said. “Around the world we’ve seen a resurgence of Selfridges and Bonmarché and La Rinascente in Italy – they’ve all been on this journey [but] David Jones has been behind the eight ball and we are determined to put it back in its rightful position.”

Bold words. But what’s the detail? Nairn said the investment will touch every aspect of the David Jones experience, from its fashion and accessories offer in store and online, to loyalty programmes and technology.

The retailer has hired an international designer to work on the look of the next David Jones store, which is slated to open in 2016.

“We are really looking at ¬reintroducing theatre into the business, whether it be… continual pop-up stores or much more digital in the store to give us a richer content for customers as they flow through the store.’’

The in-store changes would also include reducing floor space for homewares and childrenswear which typically recorded less earnings per square metre than other better performing lines such as beauty and womenswear, Nairn said.

He promised that by next Christmas its current store network would look “radically different”, in terms of visual merchandise, concession stores and the theatre of the retail space, with 1,600 concession sites alone to be shifted.

Nairn said the new store network would reflect the outcome of extensive research: “We have a very good understanding now who our customer is, where they shop with us and also most importantly outside our store, and this is something the business hasn’t done historically so we are now diving into that.

He added: “It’s about fashion, it’s about brand, it’s about the look for the season.’’

Meanwhile, Nairn said he was “shocked” at what he found when he finally took over his Sydney office

“The systems that David Jones have are so archaic,” he said. “The retail inventory method of accounting they use does not allow you to get down to the detail of profit per SKU,” he said, and there was no way of knowing when to replenish own-buy stock when it had sold out.

“I’ve been in retailing for 30 years and the last time I saw this methodology of accounting was 20 years ago.”

Rather than building a completely new retail accounting system, Nairn will piggyback off the Country Road or Woolworths Oracle systems. “Both are state of the art, tier 1 systems with sophisticated planning and product management systems and replenishment modelling.”

Nairn and his boss, Woolworths chief executive Ian Moir, were also shocked to find that David Jones could not communicate directly with 94% of its customers because it lacked a sophisticated customer relationship management system. Nairn and his team are looking at several options for a new customer loyalty scheme.

The loyalty scheme plans to have up to 5m members and allow David Jones to understand the spending habits of its customer base.

“In this day and age you start the relationship with a customer generally through a digital one,” said Narin, adding: “At the moment we don’t have that strong ability.’’

Nairn, 53, took the helm in August after Woolworths Holdings outlaid $2.1bn for David Jones and $213m to buy out minority shareholders, including Solomon Lew, in Country Road.